Five months ago, Second Cup’s general counsel Dan Caldarone was faced with an opportunity. Should he stay with the company following a significant restructuring, or go out on his own? He wanted to do both, so together with executive leadership he found a way to make it happen.
What Caldarone did is an extension of the kind of alternative arrangements popping up for in-house departments and lawyers across the country. He established Caldarone Law but remains the acting general counsel for the Canadian coffee company. He is not an employee of Second Cup, but provides the service on an outsourced basis.
Caldarone had been at Second Cup for two years when the company started talking about reorganization. A reconstitution of the board of directors occurred last December and a new CEO, Alix Box, was brought on board in February. The whole organization, including the management team, was then under review for about four months.
“Overall, the goal was to become more nimble and adjust the cost base and to right-size, if you will,” says Second Cup chief financial officer Steve Boyack.
The company cut 30 per cent of the workforce in June at all departments and all levels. The senior team went from seven to five people — Caldarone was part of that team.
“We involved Dan in the whole process,” says Boyack. “He could have stayed on board but he would have had some additional responsibilities with other functional groups. His passion is law though so he pitched this idea to us.”
Prior to arriving at Second Cup Caldarone was in-house at Cara Operations Ltd., and before that was a partner at Aird & Berlis LLP.
“I would occasionally think about going back to private practice and when Second Cup was talking about reorganization I saw the opportunity to do their legal work on an external basis,” says Caldarone.
Second Cup decided if it was going to outsource its legal function, it wanted to do so with someone who knew its business.
“We had some apprehension at first but we’re very pleased with it and it’s working quite well. Dan’s obviously a big part of that. It’s only as good as the service provider,” says Boyack.
Second Cup and Caldarone use other external law firms for work the company needs done in the areas of human resources, corporate tax, and securities work. Caldarone manages those relationships.
“Through Dan we have a portfolio of lawyers but it’s important to have that quarterback of everything and that’s why we wanted to maintain the GC role,” says Boyack.
Caldarone charges Second Cup a fixed weekly fee, which is based on an anticipated number of hours of work per week. Second Cup views Caldarone’s position as a “flex-time” arrangement — some weeks it’s full time while other weeks things are slower. He also has his own practice he wants to grow.
“He has some other clients but right now we’re able to get the time we need. He is still viewed as an insider, not an outsider,” says Boyack. “We set targets for what we think we will need to do on an on-going basis but it fluctuates week to week.”
Boyack points out the company has similar arrangements in other areas such as real estate that mirror the legal model. Until earlier this year, it used multiple brokers across the country serving the company but has migrated to one on a national basis.
“They’re an external firm but we view them as part of the team and whether they are doing it in their offices or our offices or on the road we’re indifferent as long as it works,” he says. “It’s about getting access to the talent and the right cost structure.”
Caldarone’s work at Second Cup consists primarily of franchise work, supply and commercial agreements, marketing, and employment law requirements.
When the reorganization was being discussed, Caldarone was offered a new position that would involve more management work but he decided that wasn’t what he really wanted to do.
“I was also spending a lot of time on management team work,” says Caldarone.
“I had the opportunity to go on my own and take a significant client with me,” he says. “I have a history with the company and know things other people don’t and I like to think I work well with the management team and they knew what I was capable of.”
Caldarone presented Second Cup’s management team with “a fair assessment” of the time he was spending on legal work compared to management work.
“I know the trend in ‘new law’ is on-demand service,” he says. “I still attend meetings and have direct contact with the directors of franchising and the supply,” he says.
He maintains an office at Second Cup but has his own home office as well.
“As I’m running my law practice like a business and stripping out unnecessary costs, I can pass on the benefit to clients with cost-effective fee arrangements,” he says.
Caldarone is not the only in-house counsel who has embraced the entrepreneurial spirit. Mary Ormond was a vice president with Cara Operations for 10 years, most recently as VP of real estate but has now launched her own practice, Ormond Law, specializing in commercial leasing.
After a restructuring also occurred at Cara, Ormond left voluntarily in April and took some time to think through her options including returning to private practice.
“When I talked to other in-house counsel I discovered I was finding more and more felt the legal services available were becoming cost prohibitive. By choosing to start my own firm I could keep a low overhead by working from home,” she says. “At 18 years out I bring a certain service level of experience but at rates comparable to a junior associate or lower at one of the big firms.”
Ormond says the appeal of starting her own firm trumped a return to another in-house role.
“Having been in-house and experiencing the pressures of limited budgets that need to do more and more I realized the perfect thing for me was to consider private practice,” she says. “To negotiate a commercial lease I don’t need a team of juniors — I can operate fairly independently. The solo practitioner option is quite appealing.